Oil prices sink after disappointing economic data

NEW YORK — Oil prices sank roughly five per cent on Wednesday after disappointing economic data from China and Europe revived global demand fears and U.S. crude inventories rose unexpectedly for the second week in a row.

Brent crude dropped $2.90, or 4.7 per cent, to $58.40 a barrel, by 1:08 p.m. EDT, erasing the previous session’s sharp gains after the United States moved to delay tariffs on some Chinese products. The global benchmark rose 4.7 per cent on Tuesday, its biggest daily percentage gain since December.

U.S. West Texas Intermediate crude futures shed $2.96, or 5.2 per cent, to $54.14 a barrel, having risen four per cent the previous session, the most in just over a month.

China reported weak data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the United States intensifies. The global economic slowdown, amplified by tariff conflicts and uncertainty over Brexit, is also hitting European economies. A slump in exports sent Germany’s economy into reverse in the second quarter, data showed.

The euro zone’s GDP barely grew in the second quarter of 2019.

“The data out of China, the potential recession brewing in Germany, all of that is playing into global demand worries,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “Today, we’re back in fear mode.”

The U.S. Treasury bond yield curve inverted for the first time since 2007, in a sign of investor concern that the world’s biggest economy could be heading for recession.

A second week of unexpected builds in U.S. crude inventories added to the pressure on the oil markets. U.S. crude stocks grew by 1.6 million barrels last week compared with analysts’ expectations for a decrease of 2.8 million barrels as refineries cut output.